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Gold price holding stady; China looks to increase holdings

The Gold price has been steady today after last week’s drop in price. The well documented economic crisis in Europe has the market in a holding pattern until further news warrants movement. There has been much talk of how the yellow metal is being affected by global issues, however those issues may not be the strongest influence of late. “While commentators spend much time talking about how Gold is being influenced by the risk to the global financial/banking system from euro troubles, Gold seems to be primarily tracking one trend, namely the trend in the U.S. dollar,” Citi said in a note.

The focus of European economic trouble seems to be on Spain. While the issues with Greece and Italy have been well documented, the issues with Spain are maybe even more complex. Spain has historically been a strong economic force in Europe. Spain’s banking system has been seen as well managed, unlike those in Greece and Italy. Dr. Peter Morici of the Robert H. Smith School of Business said, “Simply, Spain’s resort industry, home values and banks are collateral damage of the wider global crisis and European recession. Indeed, the IMF, in a detailed report published on May 30, found the core of Spanish banking sound, regulation generally effective, and needed restructuring well under way.”

China has taken notice of the financial issues in Europe and is looking to Gold for diversity. “Investors here want to hold part of their assets in Gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis,” Zheng Zhiguang, general manager of the Precious Metals department at Industrial and Commercial Bank of China Ltd., said in an interview in Shanghai. Gold demand was 13 percent higher in the first quarter of this year compared to 2011.